In a post earlier today, we highlighted the fact that shares of Netflix (NFLX) have returned close to 1,000% in the last three years which is nearly double the gain of the next closest S&P 500 stock over that time period. While holders of NFLX have been having a great three years, it’s been a nightmare for traders who have been short the stock. During this time, short interest in NFLX has been declining but is still quite large compared to other stocks. The chart below compares the price of NFLX over the last three years to the stock’s short interest as a percent of float. When NFLX’s rally was getting started in the Summer of 2012, nearly one-third of the stock’s float was sold short. Then as the price rallied the shorts began to capitulate. As the stock has taken its most recent leg higher this year, short interest has taken another leg lower. At the end of January more than 10% of the stock’s float was sold short, but as of the most recent data for the month of May, short interest has dropped to a three-year low of 6.76%.
While it may look like shorts in NFLX have capitulated, even at current levels the stock has a high level of short interest for a stock of its size. At its current market cap of $41 billion, NFLX is one of just three stocks in the S&P 500 that has a market cap of more than $40 billion and more than 6% of its free-floating shares sold short. (The other two are AT&T and Express Scripts.) We usually quote short interest levels as a percentage of float, but in the table below we have listed the S&P 500 stocks with the highest short interest in terms of dollar value. In other words, based on where the stock is trading how much capital would be needed to cover all of the existing short bets outstanding? Of the 20 stocks listed, NFLX comes in at 17 with more than $2.6 billion in outstanding bets on the short side. Even after what looks like a capitulation among the short-sellers in NFLX stock, short interest is actually still elevated compared to other stocks in the S&P 500.